CPC Contemplates Execution Of A Foreign Decree And Not An Order: Delhi High Court
The High Court of Delhi has held that remedy before the foreign arbitral tribunal would not be inefficacious when the bulk of the assets of a party are located in India as the interim order in a foreign-seated arbitration is not enforceable under the A&C Act. The Bench of Justice Sanjeev Narula also held that an interim award passed in arbitration with seat in India is...
The High Court of Delhi has held that remedy before the foreign arbitral tribunal would not be inefficacious when the bulk of the assets of a party are located in India as the interim order in a foreign-seated arbitration is not enforceable under the A&C Act.
The Bench of Justice Sanjeev Narula also held that an interim award passed in arbitration with seat in India is enforceable under Section 17(2) of the Act, however, there is no provision in the Act for the enforcement of an interim order passed in a foreign seated arbitration, therefore, any meaningful interim relief related to assets located in India can only be granted by Indian Courts.
The Court also observed that an application for interim relief qua the assets located in India would not be efficacious before the seat court as well as its order can also not be directly enforced under the provisions of the Civil Procedure Code, 1908. It observed that CPC only contemplates execution of a foreign decree and not an order.
Facts
SEGCL (Petitioner) and Reliance Infra Projects (UK) Ltd entered into an 'Equipment Supply and Service Contract' dated 26.06.2008 whereby the petitioner was to supply equipment, erect the main body of the turbines and generators, and provide supervision services to Reliance UK in relation to an ultra-mega power project in Madhya Pradesh.
The respondent was to pay Rs. 9461 Crores in consideration to the petitioner. To guarantee the performance of obligations on behalf of Reliance UK, Reliance Infrastructure Limited (Respondent) issued a Guarantee Letter dated 26.06.2008.
The project work was completed on 32.11.2017. As of August 2019, Reliance UK owed an amount of Rs. 995 to the petitioner under the agreement. Accordingly, the petitioner issued a notice to the respondent to fulfill its obligation under the guarantee letter.
On non-compliance with the aforesaid letter, the petitioner invoked the arbitration clause. The proceedings are administered by SIAC under the UNCITRAL Rules.
The petitioner approached the Court under Section 9 of the A&C Act to secure the amount in dispute and to restrain the respondent from selling, transferring or otherwise disposing of and/ or creating any encumbrances on its assets during the pendency of the arbitration proceedings.
Case Of The Petitioner
The petitioner contended that since the beginning of the arbitration, the respondent has been hurriedly dissipating its assets, which, according to the petitioner, is being done to deprive it of the fruits of the award that is likely to be passed in its favour.
The petitioner also contended that the auditors of the respondent have raised serious concerns regarding its fast-deteriorating financial health and ability to continue as a "going concern". Therefore, the indulgence of the court is necessary to secure the amount in dispute in arbitration and to restrain the respondent from further disposing of its assets as that would deprive the petitioner of the fruits of the award.
Objection regarding maintainability of the application under Section 9 of the A&C Act during the pendency of arbitration proceedings
The respondent objected to the maintainability of the application under Section 9 of the A&C Act during the pendency of the arbitration proceedings, it contended as under:
- In terms of Section 9(3) of the A&C Act, an application for interim reliefs is not maintainable once the arbitral tribunal has been constituted, therefore, as the tribunal is already in place, the petition is not maintainable.
- The petitioner has an equally efficacious remedy before the arbitral tribunal as Rule 26 of the UNCITRAL Rules also permits the tribunal to pass interim reliefs, including preserving assets out of which a subsequent award may be satisfied. Therefore, the relief sought by the petitioner can be very well granted by the tribunal.
- The petitioner had in fact in its statement of claims sought a similar relief which it withdrew to avoid payment of revised cost of arbitration as the SIAC had increased the cost due to the claim of the petitioner.
The petitioner countered the objection raised by the respondent on the following grounds:
- The remedy before the foreign tribunal or foreign seat court would not be efficacious as the interim order passed by the tribunal or the court is not directly enforceable either under the A&C Act or under the CPC.
- Section 9(3) of the A&C Act refers only to Section 17, which is inapplicable to foreign-seated arbitration, therefore, objection is without any merit.
Analysis By The Court
At the outset, the Court observed that although Section 9(3) only refers to Section 17 of the Act, however, it equally applies to foreign seated arbitration, therefore, it the remedy before the tribunal is efficacious, the application under Section 9 would be non-maintainable.
The Court held that remedy before the foreign arbitral tribunal would be inefficacious, when the bulk of the assets of a party are located in India, as the interim order in a foreign-seated arbitration is not enforceable under the A&C Act.
The Court held that an interim award passed in an arbitration with seat in India is enforceable under Section 17(2) of the Act, however, there is no provision in the Act for the enforcement of an interim order passed in a foreign seated arbitration, therefore, any meaningful interim relief related to assets located in India can only be granted by Indian Courts.
The Court also observed that an application for interim relief qua the assets located in India would not be efficacious before the seat court as well as its order can also not be directly enforced under the provisions of the Civil Procedure Code, 1908. It observed that CPC only contemplates execution of a foreign decree and not an order.
Accordingly, the Court held rejected the objection of the respondent.
Case Title: Shanghai Electric Group Co. Ltd. v. Reliance Infrastructure Ltd. O.M.P. (I) (COMM.) 433 of 2022
Citation: 2022 LiveLaw (Del) 681
Date: 19.07.2022
Counsel for the Petitioner: Mr. Rajiv Nayar and Mr. Dayan Krishnan, Senior Advocates with Mr. Ashish Bhan, Mr. Ketan Gaur and Mr. Aayush Mitruka, Advocates.
Counsel for the Respondent: Mr. Harish Salve and Mr. Sandeep Sethi, Senior Advocates with Mr. Sanjeev Kapoor, Mr. Mahesh Agarwal, Mr. Gaurav Juneja, Mr. Aditya Ganju, Mr. Pranjit Bhattacharya, Mr. Akshit Mago, Ms. Shruti Garg, Mr. Arjit Oswal and Ms. Monika Vyas, Advocates.